SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________ to ___________
Commission file number 1-9210
_____________________
OCCIDENTAL PETROLEUM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 95-4035997
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
10889 WILSHIRE BOULEVARD, LOS ANGELES, CALIFORNIA 90024
(Address of principal executive offices) (Zip Code)
(310) 208-8800
(Registrant's telephone number, including area code)
_____________________
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1996
--------------------------- -----------------------------
Common stock $.20 par value 319,354,354 shares
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONTENTS
PAGE
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheets --
March 31, 1996 and December 31, 1995 2
Consolidated Condensed Statements of Operations --
Three months ended March 31, 1996 and 1995 4
Consolidated Condensed Statements of Cash Flows --
Three months ended March 31, 1996 and 1995 5
Notes to Consolidated Condensed Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 14
Item 4. Submission of Matters to a Vote of Security-Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
1
PART I FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Amounts in millions)
1996 1995
================================================================= ======== ========
ASSETS
CURRENT ASSETS
Cash and cash equivalents (Note 4) $ 118 $ 520
Receivables, net 987 891
Inventories (Note 5) 588 647
Prepaid expenses and other 419 461
-------- --------
Total current assets 2,112 2,519
LONG-TERM RECEIVABLES, net 158 158
EQUITY INVESTMENTS (Note 11) 928 927
PROPERTY, PLANT AND EQUIPMENT, at cost, net of
accumulated depreciation, depletion and amortization of $8,967
at March 31, 1996 and $8,837 at December 31, 1995 (Note 6) 13,872 13,867
OTHER ASSETS 399 344
-------- --------
$ 17,469 $ 17,815
================================================================= ======== ========
The accompanying notes are an integral part of these financial statements.
2
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
MARCH 31, 1996 AND DECEMBER 31, 1995
(Amounts in millions)
1996 1995
========================================================================= ======== ========
LIABILITIES AND EQUITY
CURRENT LIABILITIES
Current maturities of senior funded debt and capital lease liabilities $ 50 $ 522
Notes payable 18 16
Accounts payable 869 859
Accrued liabilities 1,061 1,168
Domestic and foreign income taxes 138 92
-------- --------
Total current liabilities 2,136 2,657
-------- --------
SENIOR FUNDED DEBT, net of current maturities and unamortized discount 4,964 4,819
-------- --------
DEFERRED CREDITS AND OTHER LIABILITIES
Deferred and other domestic and foreign income taxes 2,619 2,620
Other 3,081 3,089
-------- --------
5,700 5,709
-------- --------
NONREDEEMABLE PREFERRED STOCK, COMMON STOCK AND
OTHER STOCKHOLDERS' EQUITY
Nonredeemable preferred stock, stated at liquidation value 1,325 1,325
Common stock, at par value 64 64
Other stockholders' equity
Additional paid-in capital 4,539 4,631
Retained earnings(deficit) (1,269) (1,402)
Cumulative foreign currency translation adjustments 10 12
-------- --------
4,669 4,630
-------- --------
$ 17,469 $ 17,815
========================================================================= ======== ========
The accompanying notes are an integral part of these financial statements.
3
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Amounts in millions, except per-share amounts)
Three Months Ended
March 31
--------------------
1996 1995
========================================================================== ======== ========
REVENUES
Net sales and operating revenues
Oil and gas operations $ 754 $ 705
Natural gas transmission operations 702 538
Chemical operations 1,068 1,472
Other (2) (1)
-------- --------
2,522 2,714
Interest, dividends and other income 25 26
Gains on asset dispositions, net 5 6
Income from equity investments (Note 11) 20 25
-------- --------
2,572 2,771
-------- --------
COSTS AND OTHER DEDUCTIONS
Cost of sales 1,874 2,027
Selling, general and administrative and other operating expenses 234 245
Exploration expense 16 18
Interest and debt expense, net 140 149
-------- --------
2,264 2,439
-------- --------
Income(loss) before taxes 308 332
Provision for domestic and foreign income and other taxes (Note 10) 144 154
-------- --------
Income before extraordinary gain(loss), net 164 178
Extraordinary gain(loss), net (Note 2) (30) --
-------- --------
NET INCOME(LOSS) 134 178
Preferred dividends (23) (23)
-------- --------
EARNINGS(LOSS) APPLICABLE TO COMMON STOCK $ 111 $ 155
======== ========
PRIMARY EARNINGS PER COMMON SHARE
Income before extraordinary gain(loss), net $ .44 $ .49
Extraordinary gain(loss), net (.09) --
-------- --------
Primary earnings(loss) per common share $ .35 $ .49
======== ========
FULLY DILUTED EARNINGS PER COMMON SHARE
Income before extraordinary gain(loss), net $ .43 $ .47
Extraordinary gain(loss), net (.09) --
-------- --------
Fully diluted earnings(loss) per common share $ .34 $ .47
======== ========
DIVIDENDS PER SHARE OF COMMON STOCK $ .25 $ .25
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON
SHARES OUTSTANDING 319.4 317.3
========================================================================== ======== ========
The accompanying notes are an integral part of these financial statements.
4
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Amounts in millions)
1996 1995
============================================================================== ======== ========
CASH FLOW FROM OPERATING ACTIVITIES
Net income(loss) $ 134 $ 178
Adjustments to reconcile income to net cash provided by operating activities
Extraordinary (gain)loss, net 30 --
Depreciation, depletion and amortization of assets 224 238
Deferred income tax provision 40 12
Other noncash charges to income 49 87
Gains on asset dispositions, net (5) (6)
Income from equity investments (20) (25)
Exploration expense 16 18
Changes in operating assets and liabilities (137) (188)
Other operating, net (39) (29)
-------- --------
Net cash provided by operating activities 292 285
-------- --------
CASH FLOW FROM INVESTING ACTIVITIES
Capital expenditures (233) (160)
Proceeds from disposal of property, plant and equipment, net 6 15
Purchase of businesses -- (5)
Sale of businesses, net -- 56
Other investing, net 3 15
-------- --------
Net cash used by investing activities (224) (79)
-------- --------
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds from senior funded debt -- 62
Net proceeds from commercial paper and revolving credit agreements 632 (182)
Payments on senior funded debt and capital lease liabilities (1,012) (8)
Proceeds from issuance of common stock 6 8
Proceeds(payments) of notes payable 3 1
Cash dividends paid (103) (98)
Other financing, net 4 --
-------- --------
Net cash provided(used) by financing activities (470) (217)
-------- --------
Increase(decrease) in cash and cash equivalents (402) (11)
Cash and cash equivalents--beginning of period 520 129
-------- --------
Cash and cash equivalents--end of period $ 118 $ 118
============================================================================== ======== ========
The accompanying notes are an integral part of these financial statements.
5
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
March 31, 1996
1. General
The accompanying unaudited consolidated condensed financial statements have
been prepared by Occidental Petroleum Corporation (Occidental) pursuant to
the rules and regulations of the Securities and Exchange Commission. Certain
information and disclosures normally included in notes to consolidated
financial statements have been condensed or omitted pursuant to such rules
and regulations, but resultant disclosures are in accordance with generally
accepted accounting principles as they apply to interim reporting. The
consolidated condensed financial statements should be read in conjunction
with the consolidated financial statements and the notes thereto
incorporated by reference in Occidental's Annual Report on Form 10-K for the
year ended December 31, 1995 (1995 Form 10-K).
In the opinion of Occidental's management, the accompanying consolidated
condensed financial statements contain all adjustments (consisting only of
normal recurring adjustments) necessary to present fairly Occidental's
consolidated financial position as of March 31, 1996 and the consolidated
results of operations and cash flows for the three months then ended. The
results of operations and cash flows for the period ended March 31, 1996 are
not necessarily indicative of the results of operations or cash flows to be
expected for the full year.
Certain financial statements and notes for the prior year have been changed
to conform to the 1996 presentation.
Reference is made to Note 1 to the consolidated financial statements
incorporated by reference in the 1995 Form 10-K for a summary of significant
accounting policies.
2. Extraordinary Gain(Loss)
The 1996 first quarter results included a net extraordinary loss of $30
million, which resulted from the early retirement of high-coupon debt.
3. Supplemental Cash Flow Information
Cash payments during each of the three month periods ended March 31, 1996
and 1995 included federal, foreign and state income taxes of approximately
$17 million. Interest paid (net of interest capitalized) totaled
approximately $164 million and $171 million for the three month periods
ended March 31, 1996 and 1995, respectively.
4. Cash and Cash Equivalents
Cash equivalents consist of highly liquid money-market mutual funds and bank
deposits with maturities of three months or less when purchased. Cash
equivalents totaled $146 million and $620 million at March 31, 1996 and
December 31, 1995, respectively. The reduction in cash equivalents reflected
the use of cash for the redemption of the 11.75% Senior Debentures in March
1996.
A cash-management system is utilized to minimize the cash balances required
for operations and to invest the surplus cash in liquid short-term money-
market instruments and/or to pay down short-term
6
borrowings. This can result in the balance of short-term money-market
instruments temporarily exceeding cash and cash equivalents.
5. Inventories
A portion of inventories is valued under the LIFO method. The valuation of
LIFO inventory for interim periods is based on management's estimates of
year-end inventory levels and costs. Inventories consist of the following
(in millions):
Balance at March 31, 1996 December 31, 1995
========================= ============== =================
Raw materials $ 106 $ 116
Materials and supplies 184 180
Work in progress 18 17
Finished goods 331 363
------- -------
639 676
LIFO reserve (51) (29)
------- -------
Total $ 588 $ 647
======= =======
6. Property, Plant and Equipment
Reference is made to the consolidated balance sheets and Note 1 thereto
incorporated by reference in the 1995 Form 10-K for a description of
investments in property, plant and equipment.
7. Retirement Plans and Postretirement Benefits
Reference is made to Note 14 to the consolidated financial statements
incorporated by reference in the 1995 Form 10-K for a description of the
retirement plans and postretirement benefits of Occidental and its
subsidiaries.
8. Lawsuits, Claims and Related Matters
Occidental and certain of its subsidiaries have been named in a substantial
number of governmental proceedings as defendants or potentially responsible
parties under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) and corresponding state acts. These proceedings seek
funding, remediation and, in some cases, compensation for alleged property
damage, punitive damages and civil penalties, aggregating substantial
amounts. Occidental is usually one of many companies in these proceedings,
and has to date been successful in sharing response costs with other
financially sound companies. Occidental has accrued reserves at the most
likely cost to be incurred in those proceedings where it is probable that
Occidental will incur remediation costs which can be reasonably estimated.
As to those proceedings, for which Occidental does not have sufficient
information to determine a range of liability, Occidental does have
sufficient information on which to base the opinion below.
It is impossible at this time to determine the ultimate legal liabilities
that may arise from various lawsuits, claims and proceedings, including
environmental proceedings described above, pending against Occidental and
its subsidiaries, some of which involve substantial amounts. However, in
management's
7
opinion, after taking into account reserves, none of such pending lawsuits,
claims and proceedings should have a material adverse effect upon
Occidental's consolidated financial position or results of operations in any
given year.
9. Other Commitments and Contingencies
Occidental has certain other commitments under contracts, guarantees and
joint ventures, as well as certain other contingent liabilities.
Additionally, Occidental has agreed to participate in the development of
certain natural gas reserves and construction of a liquefied natural gas
plant in Malaysia; however, Occidental has not yet entered into any material
development or construction contracts.
Reference is made to Note 11 to the consolidated financial statements
incorporated by reference in the 1995 Form 10-K for information concerning
Occidental's long-term purchase obligations for certain products and
services.
In management's opinion, none of such commitments and contingencies
discussed above should have a material adverse effect upon Occidental's
consolidated financial position or results of operations in any given year.
10. Income Taxes
The provision for taxes based on income for the 1996 and 1995 interim
periods was computed in accordance with Interpretation No. 18 of APB Opinion
No. 28 on reporting taxes for interim periods and was based on projections
of total year pretax income.
At December 31, 1995, Occidental had, for U.S. federal income tax return
purposes, a capital loss carryforward of approximately $21 million, a
business tax credit carryforward of $20 million and an alternative minimum
tax credit carryforward of $270 million available to reduce future income
taxes. To the extent not used, the capital loss carryforward expires in 2000
and the business tax credit expires in varying amounts during the years 2000
and 2001. The alternative minimum tax credit carryforward does not expire.
Occidental is subject to audit by taxing authorities for varying periods in
various tax jurisdictions. Management believes that any required adjustments
to Occidental's tax liabilities will not have a material adverse impact on
Occidental's financial position or results of operations in any given year.
11. Investments
Investments in companies in which Occidental has a voting stock interest of
at least 20 percent, but not more than 50 percent, and certain partnerships
are accounted for on the equity method. At March 31, 1996, Occidental's
equity investments consisted primarily of joint-interest pipelines,
including a pipeline in the Dutch sector of the North Sea, a 30 percent
investment in the common shares of Canadian
8
Occidental Petroleum Ltd. and various chemical partnerships. The following
table presents Occidental's proportionate interest in the summarized
financial information of its equity method investments (in millions):
Three Months Ended March 31, 1996 1995
============================ ======= =======
Revenues $ 192 $ 192
Costs and expenses 172 167
------- -------
Net income $ 20 $ 25
======= =======
12. Summarized Financial Information of Wholly Owned Subsidiary
Occidental has guaranteed the payments of principal of, and interest on,
certain publicly traded debt securities of its subsidiary, OXY USA Inc. (OXY
USA). The following tables present summarized financial information for OXY
USA (in millions):
Three Months Ended March 31, 1996 1995
============================ ======= =======
Revenues $ 234 $ 176
Costs and expenses 211 190
------- -------
Net income(loss) $ 23 $ (14)
======= =======
Balance at March 31, 1996 December 31, 1995
=============================== ============== =================
Current assets $ 142 $ 206
Intercompany receivable $ 416 $ 323
Noncurrent assets $ 2,041 $ 2,057
Current liabilities $ 248 $ 244
Interest bearing note to parent $ 113 $ 121
Noncurrent liabilities $ 1,278 $ 1,283
Stockholders' equity $ 960 $ 938
------------------------------- -------------- -----------------
13. Subsequent Events
In April 1996, Occidental completed the sale of its subsidiary which engages
in on-shore drilling and servicing of oil and gas wells for approximately
$32 million. In addition, certain assets of its international phosphate
fertilizer trading operation were sold for approximately $20 million. These
transactions will not result in a material gain or loss. Also in April,
Occidental completed the acquisition of a 64 percent equity interest in
INDSPEC Holding Corporation (INDSPEC) for approximately $87 million in
common stock. Under the terms of the transaction, INDSPEC's management and
employees retained voting control of INDSPEC.
9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Occidental's net income for the first quarter of 1996 was $134 million, on net
sales and operating revenues of $2.5 billion, compared with $178 million, on net
sales and operating revenues of $2.7 billion, for the same period of 1995.
Primary earnings per common share were $.35 for the first quarter of 1996,
compared with $.49 for the same period of 1995.
The decrease in net sales and operating revenues and net income for the first
quarter of 1996, compared with the same period of 1995, primarily reflected the
impact of reduced chemical prices, primarily for petrochemicals and PVC resins,
partially offset by higher worldwide crude oil prices, increased international
crude oil production and higher domestic natural gas prices. The 1996 first
quarter earnings were also negatively impacted by a net extraordinary loss of
$30 million ($.09 per share), which resulted from the early retirement of high-
coupon debt.
Income from equity investments decreased for the first quarter of 1996, compared
with the similar period of 1995. The decrease in 1996 primarily reflected lower
equity earnings from chemical investments, partially offset by higher equity
earnings from oil and gas investments.
The following table sets forth the sales and earnings of each operating division
and corporate items (in millions):
First Quarter
------------------
1996 1995
======= =======
DIVISIONAL NET SALES
Oil and gas $ 754 $ 705
Natural gas transmission 702 538
Chemical 1,068 1,472
Other (2) (1)
------- -------
NET SALES $ 2,522 $ 2,714
======= =======
DIVISIONAL EARNINGS
Oil and gas $ 161 $ 60
Natural gas transmission 121 75
Chemical 118 307
------- -------
400 442
UNALLOCATED CORPORATE ITEMS
Interest expense, net (130) (144)
Income taxes, administration and other (106) (120)
------- -------
INCOME BEFORE EXTRAORDINARY GAIN(LOSS), NET 164 178
Extraordinary gain(loss), net (30) --
------- -------
NET INCOME(LOSS) $ 134 $ 178
======= =======
10
Oil and gas earnings for the first quarter of 1996 were $161 million, compared
with $60 million for the same period of 1995. The increase in earnings in 1996,
compared with 1995, reflected higher worldwide crude oil prices, increased
international crude oil production, higher domestic natural gas prices and
reduced costs. Oil and gas prices are sensitive to complex factors, which are
outside the control of Occidental. Accordingly, Occidental is unable to predict
with certainty the direction, magnitude or impact of future trends in sales
prices for oil and gas.
Natural gas transmission earnings for the first quarter of 1996 were $121
million, compared with $75 million for the same period of 1995. The improvement
in earnings and revenues for the first quarter of 1996, compared with the same
period of 1995, resulted primarily from higher sales and transportation margins
and volumes largely related to the colder than normal weather in the Midwest and
Eastern United States.
Chemical earnings for the first quarter of 1996 were $118 million, compared with
$307 million for the same period of 1995. The decrease in 1996 earnings
reflected the impact of decreased profit margins for petrochemicals and PVC
resins and the absence of income applicable to assets divested in 1995. Most of
Occidental's chemical products are commodity in nature, the prices of which are
sensitive to a number of complex factors. Occidental is unable to accurately
forecast the trend of sales prices for its commodity chemical products.
However, PVC and certain petrochemical prices recently have increased slightly,
while others, particularly chlor-alkali, remained firm during the first quarter
of 1996.
Divisional earnings include credits in lieu of U.S. federal income taxes. In
the first quarter of 1996, divisional earnings benefited by $22 million from
credits allocated. This included credits of $4 million, $12 million and $6
million at oil and gas, natural gas transmission and chemical, respectively. In
the first quarter of 1995, divisional earnings benefited by $23 million. The
comparable amounts allocated to the divisions were credits of $4 million, $12
million and $7 million at oil and gas, natural gas transmission and chemical,
respectively.
Occidental and certain of its subsidiaries are parties to various lawsuits,
environmental and other proceedings and claims, some of which involve
substantial amounts. See Note 8 to the consolidated condensed financial
statements. Occidental also has commitments under contracts, guarantees and
joint ventures and certain other contingent liabilities. See Note 9 to the
consolidated condensed financial statements. In management's opinion, after
taking into account reserves, none of these matters should have a material
adverse effect upon Occidental's consolidated financial position or results of
operations in any given year.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Occidental's net cash provided by operating activities was $292 million for the
first quarter of 1996, compared with $285 million for the same period of 1995.
The 1996 and 1995 noncash charges included employee benefit plans expense and
various other charges.
Occidental's net cash used by investing activities was $224 million for the
first quarter of 1996, compared with $79 million for the same period of 1995.
Capital expenditures were $233 million in 1996, including $160 million in oil
and gas, $33 million in natural gas transmission and $34 million in chemical.
Capital expenditures were $160 million in 1995, including $119 million in oil
and gas, $13 million in natural gas transmission and $28 million in chemical.
The increase in 1996 from 1995 reflected higher spending in oil and gas,
primarily in Yemen. Net proceeds from the sale of businesses and disposal of
property, plant and equipment for the first quarter of 1995 totaled $71 million,
which primarily reflected the proceeds from the sale of a portion of
Occidental's oil and gas operations in Pakistan.
Financing activities used net cash of $470 million in the first quarter of 1996,
compared with $217 million for the same period of 1995. The 1996 amount
reflected net cash used of $377 million to reduce short-term and long-term debt,
net of proceeds from borrowings, primarily for the redemption of the 11.75%
Senior Debentures, and the payment of dividends of $103 million. In 1995,
repayments of debt, net of proceeds from
11
borrowings, resulted in net cash used of $127 million to reduce long-term debt.
Additionally, dividend payments were $98 million.
For 1996, Occidental expects that cash generated from operations and asset
sales, if any, will be more than adequate to meet its operating requirements,
capital spending and dividend payments. Excess cash generated will be applied
to debt and liability reduction. Occidental also has substantial borrowing
capacity to meet unanticipated cash requirements.
At March 31, 1996, Occidental's working capital was a negative $24 million,
compared with a negative $138 million at December 31, 1995. Available but
unused lines of committed bank credit totaled approximately $2.0 billion at
March 31, 1996, compared with $2.6 billion at December 31, 1995.
Current maturities of senior funded debt and capital lease liabilities decreased
as a result of the redemption of the 11.75% Senior Debentures in March 1996.
In October 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 123, "Accounting for Stock-Based
Compensation." As permitted by SFAS No. 123, Occidental will not recognize
compensation expense for stock-based compensation arrangements, but rather will
disclose in the notes to the financial statements the impact on annual net
income and earnings per share as if the fair value based compensation cost had
been recognized commencing in 1996.
In April 1996, Occidental completed the sale of its subsidiary which engages in
on-shore drilling and servicing of oil and gas wells for approximately $32
million. In addition, certain assets of its international phosphate fertilizer
trading operation were sold for approximately $20 million. These transactions
will not result in a material gain or loss. Also in April, Occidental completed
the acquisition of a 64 percent equity interest in INDSPEC Holding Corporation
(INDSPEC) for approximately $87 million in common stock. Under the terms of the
transaction, INDSPEC's management and employees retained voting control of
INDSPEC.
ENVIRONMENTAL MATTERS
Occidental's operations in the United States are subject to increasingly
stringent federal, state and local laws and regulations relating to improving or
maintaining the quality of the environment. Foreign operations also are subject
to varied environmental protection laws. Costs associated with environmental
compliance have increased over time and are expected to continue to rise in the
future.
The laws which require or address remediation apply retroactively to previous
waste disposal practices. And, in many cases, the laws apply regardless of
fault, legality of the original activities or ownership or control of sites.
Occidental is currently participating in environmental assessments and cleanups
under these laws at federal Superfund sites, comparable state sites and other
remediation sites, including Occidental facilities and previously owned sites.
Occidental does not consider the number of Superfund and comparable state sites
at which it has been notified that it has been identified as being involved as a
relevant measure of exposure. Although the liability of a potentially
responsible party (PRP), and in many cases its equivalent under state law, is
joint and several, Occidental is usually one of many companies cited as a PRP at
these sites and has, to date, been successful in sharing cleanup costs with
other financially sound companies.
As of March 31, 1996, Occidental had been notified by the Environmental
Protection Agency (EPA) or equivalent state agencies or otherwise had become
aware that it had been identified as being involved at 291 Superfund or
comparable state sites. (This number does not include 59 sites where Occidental
has been successful in resolving its involvement.) The 291 sites include 81
former Diamond Shamrock Chemical sites
12
as to which Maxus Energy Corporation has retained all liability, and two sites
at which the extent of such retained liability is disputed. Of the remaining 208
sites, Occidental has had no communication or activity with government agencies
or other PRPs in four years at 38 sites, has denied involvement at 30 sites and
has yet to determine involvement in 24 sites. With respect to the remaining 116
of these sites, Occidental is in various stages of evaluation. For 106 of these
sites, where environmental remediation efforts are probable and the costs can be
reasonably estimated, Occidental has accrued reserves at the most likely cost to
be incurred. The 106 sites include 40 sites as to which present information
indicates that it is probable that Occidental's aggregate exposure is
immaterial. In determining the reserves, Occidental uses the most current
information available, including similar past experiences, available technology,
regulations in effect, the timing of remediation and cost-sharing arrangements.
For the remaining 10 of the 116 sites being evaluated, Occidental does not have
sufficient information to determine a range of liability, but Occidental does
have sufficient information on which to base the opinion expressed above under
the caption "Results of Operations."
13
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
GENERAL
There is incorporated by reference herein the information regarding legal
proceedings in Item 3 of Part I of Occidental's 1995 Annual Report on Form 10-K
and Note 8 to the consolidated condensed financial statements in Part I hereof.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY-HOLDERS
Occidental's 1996 Annual Meeting of Stockholders (the Annual Meeting) was held
on April 26, 1996. The following actions were taken at the Annual Meeting, for
which proxies were solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934, as amended:
1. The six nominees proposed by the Board of Directors were elected
as directors by the following votes:
Name For Withheld
------------------------ ----------- ---------
Edward P. Djerejian 275,933,306 4,078,308
Senator Albert Gore, Sr. 274,732,633 5,278,981
David R. Martin 275,892,214 4,119,400
George O. Nolley 275,262,800 4,748,814
John F. Riordan 275,893,417 4,118,197
Rosemary Tomich 275,963,597 4,048,017
2. A proposal to ratify the selection of Arthur Andersen LLP as
Occidental's independent public accountants for 1996 was approved
by a vote of 275,933,599 for versus 2,417,738 against. There were
1,660,277 abstentions and no broker non-votes.
3. A proposal to approve the adoption of the Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors
was approved by a vote of 254,492,573 for versus 20,224,255
against. There were 5,294,786 abstentions and no broker non-votes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10.1 Occidental Petroleum Corporation 1996 Restricted Stock Plan
for Non-Employee Directors, effective April 26, 1996 (filed
as Exhibit 99.1 to the Registration Statement on Form S-8,
File No. 333-02901)
10.2 Form of Restricted Stock Option Agreement under Occidental
Petroleum Corporation 1996 Restricted Stock Plan for Non-
Employee Directors (filed as Exhibit 99.2 to the
Registration Statement on Form S-8, File No. 333-02901)
11 Statement regarding the computation of earnings per share
for the three months ended March 31, 1996 and 1995
14
12 Statement regarding the computation of total enterprise
ratios of earnings to fixed charges for the three months
ended March 31, 1996 and 1995 and the five years ended
December 31, 1995
27 Financial data schedule for the three month period ended
March 31, 1996 (included only in the copy of this report
filed electronically with the Securities and Exchange
Commission)
(b) Reports on Form 8-K
During the quarter ended March 31, 1996, Occidental filed the
following Current Report on Form 8-K:
1. Current Report on Form 8-K dated January 24, 1996 (date of
earliest event reported), filed on January 25, 1996, for
the purpose of reporting, under Item 5, Occidental's
results of operations for the quarter ended December 31,
1995
From March 31, 1996 to the date hereof, Occidental filed the
following Current Reports on Form 8-K:
1. Current Report on Form 8-K dated April 17, 1996 (date of
earliest event reported), filed on April 19, 1996, for the
purpose of reporting, under Item 5, Occidental's results of
operations for the quarter ended March 31, 1996
2. Current Report on Form 8-K dated April 19, 1996 (date of
earliest event reported), filed on April 22, 1996, for the
purpose of reporting, among other things, under Item 5, the
price of Occidental's common stock determined for the
approximately 3.4 million shares to be issued in the
exchange offers for INDSPEC Holding Corporation
15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
OCCIDENTAL PETROLEUM CORPORATION
DATE: May 14, 1996 S. P. Dominick, Jr.
__________________________________________________
S. P. Dominick, Jr., Vice President and Controller
(Chief Accounting and Duly Authorized Officer)
16
EXHIBIT INDEX
EXHIBITS
- - --------
10.1 Occidental Petroleum Corporation 1996 Restricted Stock Plan for Non-
Employee Directors, effective April 26, 1996 (filed as Exhibit 99.1
to the Registration Statement on Form S-8, File No. 333-02901)
10.2 Form of Restricted Stock Option Agreement under Occidental Petroleum
Corporation 1996 Restricted Stock Plan for Non-Employee Directors
(filed as Exhibit 99.2 to the Registration Statement on Form S-8,
File No. 333-02901)
11 Statement regarding the computation of earnings per share for the
three months ended March 31, 1996 and 1995
12 Statement regarding the computation of total enterprise ratios of
earnings to fixed charges for the three months ended March 31, 1996
and 1995 and the five years ended December 31, 1995
27 Financial data schedule for the three month period ended March 31,
1996 (included only in the copy of this report filed electronically
with the Securities and Exchange Commission)
EXHIBIT 11
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Amounts in thousands, except per-share amounts)
Three Months Ended
March 31
-----------------------
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE 1996 1995
------------------------------------------------------------------- --------- ---------
Earnings(loss) applicable to common stock $ 110,454 $ 154,845
========= =========
Common shares outstanding at beginning of period 318,711 316,853
Issuance of common shares, weighted average 401 492
Conversions, weighted average options exercised and other 62 5
Repurchase/cancellation of common shares (69) (51)
Effect of assumed exercises
Dilutive effect of exercise of options outstanding and other 249 18
--------- ----------
Weighted average common stock and common stock equivalents 319,354 317,317
========= =========
Primary earnings per share:
Income before extraordinary gain(loss), net $ .44 $ .49
Extraordinary gain(loss), net (.09) --
--------- ---------
Earnings(loss) per common and common equivalent share $ .35 $ .49
========= =========
FULLY DILUTED EARNINGS PER SHARE
-------------------------------------------------------------------
Earnings(loss) applicable to common stock $ 110,454 $ 154,845
Dividends applicable to dilutive preferred stock:
$3.875 preferred stock(a) -- 14,635
$3.00 preferred stock(a) 8,541 8,541
--------- ---------
$ 118,995 $ 178,021
========= =========
Common shares outstanding at beginning of period 318,711 316,853
Issuance of common shares, weighted average 401 492
Conversions, weighted average options exercised and other 62 5
Repurchase/cancellation of common shares (69) (51)
Effect of assumed conversions and exercises
Dilutive effect of assumed conversion of preferred stock:
$3.875 preferred stock(a) -- 33,186
$3.00 preferred stock(a) 25,806 25,202
Dilutive effect of exercise of options outstanding and other 483 153
--------- ---------
Total for computation of fully diluted earnings per share 345,394 375,840
========= =========
Fully diluted earnings per common share:
Income before extraordinary gain(loss), net $ .43 $ .47
Extraordinary gain(loss), net (.09) --
--------- ---------
Fully diluted earnings(loss) per common share $ .34 $ .47
========= =========
-------------------------
(a) Convertible securities are not considered in the calculations if the effect of the
conversion is anti-dilutive.
EXHIBIT 12
OCCIDENTAL PETROLEUM CORPORATION AND SUBSIDIARIES
COMPUTATION OF TOTAL ENTERPRISE RATIOS OF EARNINGS TO FIXED CHARGES
(Amounts in millions, except ratios)
Three Months Ended
March 31 Year Ended December 31
------------------ ---------------------------------------------------
1996 1995 1995 1994 1993 1992 1991
- - ------------------------------------------ ------- ------- ------- ------- ------- ------- -------
Income(loss) from continuing
operations(a) $ 162 $ 170 $ 478 $ (46) $ 80 $ 131 $ 374
------- ------- ------- ------- ------- ------- -------
Add:
Provision(credit) for taxes on
income (other than foreign oil
and gas taxes) 83 115 244 50 204 114 343
Interest and debt expense(b) 143 152 592 594 601 666 880
Portion of lease rentals
representative of the interest
factor 11 14 48 55 53 56 57
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- -- 7 11
------- ------- ------- ------- ------- ------- -------
237 281 884 699 858 843 1,291
------- ------- ------- ------- ------- ------- -------
Earnings before fixed charges $ 399 $ 451 $ 1,362 $ 653 $ 938 $ 974 $ 1,665
======= ======= ======= ======= ======= ======= =======
Fixed charges
Interest and debt expense
including capitalized interest(b) $ 145 $ 153 $ 602 $ 599 $ 612 $ 685 $ 912
Portion of lease rentals
representative of the interest
factor 11 14 48 55 53 56 57
Preferred dividends to minority
stockholders of subsidiaries(c) -- -- -- -- -- 7 11
------- ------- ------- ------- ------- ------- -------
Total fixed charges $ 156 $ 167 $ 650 $ 654 $ 665 $ 748 $ 980
======= ======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 2.56 2.70 2.10 n/a(d) 1.41 1.30 1.70
- - ------------------------------------------ ======= ======= ======= ======= ======= ======= =======
(a) Includes (1) minority interest in net income of majority-owned subsidiaries having fixed charges and (2) income
from less-than-50-percent-owned equity investments adjusted to reflect only dividends received.
(b) Includes proportionate share of interest and debt expense of 50-percent-owned equity investments.
(c) Adjusted to a pretax basis.
(d) Not computed due to less than one-to-one coverage. Earnings were inadequate to cover fixed charges by $1 million.
5
1,000,000
3-MOS
DEC-31-1996
MAR-31-1996
118
0
774
18
588
2,112
22,839
8,967
17,469
2,136
5,216
0
1,325
64
3,280
17,469
2,522
2,572
1,874
2,108
16
0
140
288
144
164
0
(30)
0
134
.35
.34
